"I am trying to look out of the window now, but I can't - the smoke's really heavy and smells really bad. Everything is burnt," he said.

An oil pipeline near Basra, which carries oil for export, was damaged by a bomb.

A Southern Oil Company official told Reuters news agency the main pumping station of Zubair 1 had been shut down and that exports would be greatly affected.

In other developments across the country:

The FBI said it had recovered the bodies of two US security contractors kidnapped in Iraq in 2006

A prominent civilian spokesman for the Baghdad security operation, Tahseen Sheikhly, a Sunni who often appeared with US officials at news conferences, was kidnapped by gunmen from his home in the capital

Thousands of Sadr supporters gathered in Baghdad's Sadr City, a vast Shia-dominated suburb, to demand Mr Maliki's resignation over the military operation

Baghdad's fortified Green Zone was again hit by several rounds of rockets, causing a fire, Iraqi and US embassy officials said

Iraqi police in Kut said dozens of people were killed in clashes on Thursday between Iraqi and US forces, and Shia militiamen, the AFP news agency reported

There have also been clashes through the night and the early morning in the towns of Hilla and Diwaniya

Power struggle

The number of gunfights in southern Iraq appears to be growing, says the BBC's Crispin Thorold in Baghdad.

The fighting still seems to be mainly with members of the Mehdi Army, our correspondent says.

Baghdad's Green Zone has been targeted by insurgents again

The Medhi Army had held to a ceasefire since last August, contributing to the general fall in violence across Iraq.

It is not clear what has prompted the government crackdown at this time. The government says its campaign aims to re-impose law and order in Basra.

However, Sadrists say the government is attempting to weaken the militias before local elections scheduled for October.

At stake, analysts say, is control of Iraq's only port city and the region's oil fields.